The war for the youth subsidy

2012-05-19 11:43

The DA argues the policy will go a long way to easing unemployment

On Tuesday, I helped lead 4 000 other DA members and supporters to march for the implementation of the youth wage subsidy.

We exercised our democratic right to stand up for the solutions we believe in.

And although we were met with violence and intimidation, we are now more committed than ever to fight for this policy.

The youth wage subsidy will benefit 423 000 young South Africans in three years.

The DA’s for it. Cosatu’s against it. And the ANC government is too afraid to implement it.

Here is how the youth wage subsidy would work: For every new employee between the age of 18 and 29 that employers add to their existing labour force, they would receive a tax credit from Sars.

The tax credit would cover half the new employee’s salary up to R2 000 per month, and would cover a smaller proportion of the new employee’s salary up to R5 000 a month.

The subsidy would only be applicable for the first two years of the employee’s time at a new job.

There are a few points to be made:

» Firstly, the subsidy clearly caters for people at the lower end of the salary scale, which means it would help those who are most in need;

» Secondly, it helps that section of the population where the unemployment crisis has hit hardest – the youth;
Treasury has conducted a comprehensive study of the proposal and has projected that it could help pay for the employment of 423 000 young people in three years.

Cosatu claims the subsidy would incentivise employers to fire older workers and hire young workers at a discounted rate instead, thereby creating a “two-tiered” labour market. That is simply wrong.

Firstly, our labour legislation prohibits such retrenchments. Every time anyone is fired or retrenched, employers have to defend their decision at the CCMA.

If employers ever attempted to fire an experienced worker to hire a young worker to access the youth wage subsidy, those employers would be severely punished by the CCMA.

Cosatu’s fears ignore our labour legislation.

Secondly, employers would never fire experienced, trusted staff who have proved their worth over time.

Why would a firm fire an experienced worker, spend lots of time to find someone to replace that experienced worker, and run the risk of hiring someone not able to do the job as well as the previous worker just to save a few thousand rands in salary expenditure?

In fact, the incentives are stacked for employers to hold on to their experienced workers, and to hire young workers who can learn from them, achieving effective knowledge transfer to the next generation of employees.

All-in-all, Cosatu’s argument simply isn’t valid.

What, then, is the real reason for their vehement opposition to the youth wage subsidy? The answer is equally simple: union membership.

Those people who would be employed with the help of the youth wage subsidy would be difficult to unionise due to the unique circumstances of their employment. That’s the real reason for Cosatu’s opposition.

They just don’t want to jeopardise union membership and so they are willing to oppose a policy that can help 423 000 young South Africans find employment.

Many workers temporarily employed through the subsidy would eventually be permanently employed. Treasury estimates roughly 133 000 new permanent jobs would be created over the first three years.

But all 423 000 of those young people who benefited would have at least two years’ of work experience that they could leverage to get into their next job.

This makes them exponentially more employable, and prepares them for successful careers in the long run.

It is estimated that someone with work experience is three times more likely to find a job than someone without any experience.

New young people would obviously enter the age group as time goes on and then their employment could be facilitated with the wage subsidy as well.

As time goes beyond the first three years, the number of people who would benefit over the long run would therefore increase dramatically.

And money isn’t a problem. In 2011, government had already budgeted R5 billion for the implementation of the policy, but never used it owing to pressure from Cosatu.

That money must simply be used as allocated.

A DA government would likely increase the impact of subsidy by spending much more than R5 billion, but for now that amount must be pushed into the system to increase employment and growth.

Everything that happened this week has only strengthened my, and the party’s resolve, to stand up for what we believe to be an important solution to our country’s youth unemployment crisis.

» Maimane is the DA’s national spokesperson

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